An ardent observer, analyst and critic of politics and current happenings. Truly believes in human equality, poor and peasants have first right on resources, and rule of law essential in a democracy.
Here are my reflections and collections.

Saturday, 12 August 2017

Demonetization effect: RBI dividend to Govt halved

The RBI dividend paid to the government is the lowest since 2011-12 (Rs 16,010 crore).

The RBI did not provide any reason for the decline in dividend.

Economists said this indicated the cost incurred by the central bank in printing new notes as well as in sterilizing liquidity old currency notes that were scrapped returned to the banking system.

In the Union Budget for 2017-18, the government had accounted for a dividend of Rs 74,901 crore from the RBI and other nationalized banks. RBI’s share would be Rs 58,000 crore.

RBI Governor Urjit Patel told a parliamentary panel that notes not returned remain the RBI’s liability and cannot be passed on to the government as dividend.

The low actual dividends will exert pressure on the government and its fiscal deficit could increase from 3.2% of the GDP to 3.4% this year.

At its peak, the excess liquidity parked by banks neared Rs 5 lakh crore, on which the central bank had to pay them 6% interest. The average daily liquidity absorption continued to remain above Rs 2 lakh crore after demonetization was announced.

The appreciation of the rupee, 6% since Jan 2017, against the dollar depressed returns, in rupee terms, on the RBI’s foreign holdings.

Modi who highlights and bombards on media even smallest achievements are great, will never talk about such negatives. As Gujarat CM he neither owned up responsibility for massacre of over 2000 Muslims nor regretted it. So far, he has not talked about demonetization failure, its impacts and remedial measures taken for mitigating the problems it created to common people of India, especially in Parliament where he is duty bound to do so.